Financial phrases every HR pro should know

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  • Goodwill: Any surplus money paid to acquire a company that exceeds its net tangible assets value. Or, place where you donate the crap you couldn’t sell in the garage sale. Either way.

  • Liabilities: General term for what the business owes. While not evil, liabilities are like the last Doritos in the bag. Inevitable.

  • Net Present Value (NPV): NPV is a significant measurement in business investment decisions. You’ll need a PhD in Finance to figure out NPV… suffice to say, a dollar today is better than 110 cents in six months.

  • Overhead: An expense that cannot be attributed to any one single part of the company’s activities. Well actually, you’re overhead.

  • Return On Investment (ROI): Profits derived as a proportion of and directly attributable to cost or “book value” of an asset, liability or activity, net of depreciation. People in our industry lie about ROI all the time. Truth is, only the Loch Ness Monster knows how to truly calculate ROI. Let’s just call it guesstimate.

  • Variable Cost: A cost which varies with sales or operational volumes, e.g. materials, fuel, commission payments. Remember what I said about fixed versus variable? CFOs hate anything that is variable… it messes up those pretty Excel spreadsheets. Kidding aside, cut out variable stuff in your budget… your CFO will love you.

  • Working Capital: Current assets less current liabilities, representing the required investment, continually circulating, to finance stock, debtors, and work in progress. Like Cashflow, Working Capital is a great measure for the here and now. The Porridge Rule applies… too much working capital is bad; too little working capital is bad. It’s got to be just right.
 
What was missing from Tincup's list? Share the terms that had you scratching your head in the comments.

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